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Oxfam is wrong about ‘obscene’ wealth

REUTERS/Ruben Sprich
James Brandt, a Jan. 23 letter writer to the Star Tribune, is correct in writing, “If Bill Gates and the other rich men had never been born, the world would be worse off, and the poor would be no richer.”

Last week Oxfam released a sensational report that said eight people have “obscene” wealth, as much as the poorest half of the world’s population. I don’t dispute this statistic, but is inequality really “trapping hundreds of millions in poverty” and is higher taxes on wealth and income really a solution, as they claim? Turns out these assertions are absolutely and demonstrably wrong.

Photo by James Netz
Peter Zeller

James Brandt, a Jan 23 letter writer to the Star Tribune (“Don’t malign the rich; instead help the poor help themselves”), is correct in writing, “If Bill Gates and the other rich men had never been born, the world would be worse off, and the poor would be no richer.”

Creating value and thus wealth does not hurt the poor; it makes everyone else richer. And this fact has even been quantified by Yale economics professor William Nordhaus. He found that “most of the benefits of technological change are passed on to consumers rather than captured by producers.” His research for the National Bureau of Economic Research reported that innovators capture about 2  percent of the value they create and the other 98 percent of the value flows to consumers.

Need further convincing? Here’s Jason Furman, who served as chair of the Council of Economic Advisers in the Obama administration:

There is little dispute that Walmart’s price reductions have benefited the 120 million American workers employed outside of the retail sector. Plausible estimates of the magnitude of the savings from Walmart are enormous – a total of $263 billion in 2004, or $2,329 per household.

Sure, Sam Walton’s heirs are wealthy, about $100 billion between them, but consumers are receiving value of over $250 billion a year from that creation. So over 20 years we’ve received $5 trillion in value for the $100 billion kept by the Walton family, and that’s quite a deal. On a purely practical level, should we really care that great innovators keep 2 percent of what they create?

No we shouldn’t. We should want more rich people, creating more value, and our focus should be on reducing poverty, not inequality. According to Tim Worstall at CapX:

Oxfam’s redistribution argument has been tried before and found wanting. It was the subject of the world’s largest economic experiment: the 20th century. Anyone surveying the rubble of central Europe from the Brandenburg Gate in 1989 knows that the taking and giving solution does not work. What is needed is the wealth creation strategy that we’ve been using in the period of free-market globalization ever since.

And the result of technological advance, innovation, and free-market globalization has been wonderful and breathtaking: 

The last 100 years (or 50, or 25, take your pick) has seen the greatest reduction in poverty in human history (see the dramatic progress here).

In 2015 68% of the world population had access to proper sanitation facilities compared to only 24% in 1980.

285,000 more people have gained access to safe water every day for the past 25 years.

According to Johan Norberg, Swedish author of “Progress: Ten Reasons to Look to the Future”: “When we don’t see the progress that we’ve made, we begin to search for scapegoats for the problems that remain.”

You don’t need to like the super-rich or decide if they are deserving, but you should recognize that most of them got there by making the rest of us richer, and not fall for off-base populist rhetoric that somehow blames them for trapping others in poverty.

Peter Zeller is director of operations at Center of the American Experiment.

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Comments (31)

  1. Submitted by Pat Berg on 01/27/2017 - 08:21 am.

    Wage stagnation

    So how do you square this with middle class wage stagnation for the last 30 years or so? I would hardly characterize that as “making everyone richer”.

  2. Submitted by Pat Terry on 01/27/2017 - 09:23 am.

    Strawman special

    The problem isn’t creating wealth. The problem is the grotesque excesses pointed by the Oxfam report. This is an embarrassingly dishonest piece.

  3. Submitted by Pat McGee on 01/27/2017 - 09:39 am.

    My check must have been delivered to the wrong address.

    Because I am most certainly not richer. Poorer, yes.

  4. Submitted by Andy Summers on 01/27/2017 - 09:52 am.

    Entrepreneurs not Aristocrats

    I don’t question the need for entrepreneurs to seek and receive a reward for their work. Wealth is a yardstick of success for many, and an important incentive for the risk required to build great ventures. As Andrew Carnegie wrote about over 120 years ago, there is a stark difference between Bill Gates and the Walton Family. Bill Gates is using his wealth to solve global problems and will donate all of his wealth to those causes upon his death. He and his father have been working very hard to convince other Forbes-listers to do the same. The Waltons did not create and grow Walmart – their father did. They are now sitting on enormous wealth that could be put to better use. Couple this with the financial industry owning a inordinate share of US profits and the problems compound. The middle and lower classes are fighting over a smaller and smaller pie, while inherited sums of money continue to pool at the top and pour into evermore complex investments and tax havens. The richest families lobby extensively to keep and grow this money they did not earn, and back the propaganda that immigrants and people of color are to blame for everyone’s woes. And now we have one of their own in the White House.

  5. Submitted by Dennis Wagner on 01/27/2017 - 09:54 am.

    I’ll bite!

    What was not argued is the skewed Tax code! Have yet to hear folks begrudge the well to do for their efforts. However the Tax code is exceptionally generous to them and less generous to Joe & or Jane six pack, as noted seems the Billionaire POTUS hasn’t paid Federal Income Tax in almost 20 years! To a comment on a different post, when can we cut down the welfare for the uber-rich, tax Credits, deductions etc? Do you want to try again and also address the fairness of the system? Should be a healthy discussion.

  6. Submitted by Peter Stark on 01/27/2017 - 10:17 am.

    Strawman

    Nice try, but this is an obvious strawman argument.

    There is no reason why innovation, competition, and equitable distribution of wealth need to be at odds with one another. It is obviously false that the only country in the history of the world that has attempted a more equitable distribution of wealth and income was the USSR.

    It is also completely false that all of the wealth owned by the rich or super-rich is justly earned for providing social benefits to the proles. Much of the wealth owned by the super-rich is inherited. Over the next 20 years, just 500 people will likely pass on over $2.1 trillion to their heirs. Paris Hilton didn’t scrap from the bottom of the heap to a fashion empire; President Trump didn’t launch into real estate as a small-time hustler; Sam Walton (of Walmart fame) started his first store in 1945 with a 2016 equivalent $246,678 loan from his father-in-law, L.S. Robson, a wealthy rancher.

    This is why distribution matters. People who are born into higher income brackets tend to stay there, because of all the benefits that come with it: access to trusts, “loans,” or family wealth, access to good housing and nutrition, education, developmental opportunities, less stressful family relationships, and on and on. Those born into lower income brackets tend to stay there as well, because of all the handicaps associated with them, and because they can’t compete with people from higher brackets.

    Here is some evidence for you of social mobility in the US:
    1. http://www.pewtrusts.org/~/media/legacy/uploadedfiles/wwwpewtrustsorg/reports/economic_mobility/pursuingamericandreampdf.pdf

    2. http://inequality.stanford.edu/sites/default/files/economic_mobility_short.pdf

    I am a top-quintile guy, born into a top-quintile family, and I’ve gotten where I am purely through nepotism and taking advantage of my station. I have a toddler now, and they are essentially guaranteed a ticket to the upper-middle class by birthright, even if they don’t work particularly hard or do anything particularly out of the ordinary. According to Pew, they have a 63% chance of remaining in the top 4th or 5th quintile. My kid is also more likely to marry a high-earning partner than kids born in lower quintiles. My kid’s kids are also going to have this baked in advantage.

    A kid born just up the road into the bottom quintile will have to scrape and claw and fight against their destiny every day, and they still only have a 13% chance to get into the 4th or 5th quintile. To get into the top quintile, my kid has to basically just live their life and they have a 40% chance. The kid up the road born into the bottom quintile has a 4% chance of getting there.

    This sort of determinism based on family station is appalling and is a direct consequence of opinions like the one expressed in this article; That all wealth is justified, that all the rich earned all of their money, and that unequal distribution of wealth and income has no negative consequences for those who are bereft.

    • Submitted by Patrick Tice on 01/27/2017 - 12:12 pm.

      Stakeholders

      Great comment – What I might add is that in the coming age of automation, there is no way everyone can have a well-paying job. This is obvious to anyone who reads and can parse data, as is the concentration of wealth to such obscene excess.

      What we need to do is start thinking of people as stakeholders – not as consumers, employees, retirees, students, or (God forbid) “job creators”. In other words, we recognize that we are all in this together and everyone is entitled to some kind of basic “living”. This will require a change in the traditional American attitude toward work, since we will no longer be able to blame the unemployed for their joblessness and treat them as lazy “takers”. I’m not exactly sure how we’ll get there, but we’d better start the discussion soon – self-driving trucks are right around the corner, and your Uber will be a robot. Software will be written by AI, and many medical diagnoses will be done by machines. No one’s job is safe, so we may forestall the inevitable by shortening the workweek, but that will not ultimately be enough. Something must be done to recognize every stakeholder’s right to a living – and no amount of yammering about retraining or “new jobs” will ever solve the problem.

      With no path to wealth available through work – even hard work – the existing plutocracy will continue to reap even more while the masses stagnate at the bottom. And, as we have seen, these plutocrats will not be shy about using their resources to buy astroturf policy platforms, politicians, and a life lived without regard to national boundaries or laws that the rest of us must follow. They are already transnationals and have no real reason to think in terms of national identity, further diluting their responsibilities to fellow citizens.

      • Submitted by chuck holtman on 01/27/2017 - 12:52 pm.

        Yes, a profoundly silly article.

        I won’t pile on with yet other observations as to the fallacies populating Mr Zeller’s economic argument. I’ll just add the simple additional but different criticism that economic power, political power and the power – thru the media, schools, etc – to define the way others think all are aligned with comparative wealth. When wealth is concentrated too highly in too few hands, democracy is impossible, not just because the wealthy determine who can be a viable candidate for office, but more profoundly because the social discourse is so thoroughly managed that the people can no longer engage in the level of critical thought necessary to fulfill their roles as citizens and voters. Mr Zeller apparently would trade freedom and self-determination for the mess of pottage that is the ability to buy crap at Walmart even cheaper than it is at Target.

        I particularly appreciate the comments by Mr. Stark and Mr. Tice. As to the latter, it long has been apparent that the growth imperative (which is what ensures that wealth will continue to augment itself) has majority justification only because it is the only real mechanism that we have to distribute social wealth. If we were to substantially reduce our economic activity, much of which goes toward production of no intrinsic value, the value of capital would decline substantially but we would have a much better quality of life in the aggregate, and perhaps we keep a habitable planet, as well. But then a whole lot of folks don’t have jobs. That is what underlies the proposition that a society shifts toward (note to over-excited commenters from the Right: “toward” not “to”) socialism, and a right to a “basic living,” as it becomes wealthier and as its norms of trust strengthen.

        But interests have thwarted this natural trajectory for the past 80 years. So we’re facing a mass loss of employment in our near future without the steady evolution of social relations over these decades that would have facilitated a qualitative redistribution of labor, under which the grand leap in the productivity of labor via technology would have redounded to the benefit of all, rather than the prospect ahead of enriching a few and immiserating the many.

    • Submitted by Kevin Bradley on 02/03/2017 - 12:57 pm.

      Actually, people born into higher income brackets…

      … do not tend to stay there. Or so I was informed by a group of financial planners who specialize in estate transitions. Statistics show that inherited wealth is most often squandered, either by the generation that inherits it or the following generation. There are exceptions, of course, and most people born into poverty will have fewer opportunities than a silver spoon provides. But fortunes are often lost as quickly as they were made, and usually more so. Also, contrary to what the “Other 99%” claim, the infamous 1% is dynamic, not static. Membership in the upper echelons changes with the successes and failures of their businesses. The Walton’s place among the financial elite is probably secure, but someone near the bottom of the 1% bracket is statistically unlikely to stay there.

  7. Submitted by Rick Prescott on 01/27/2017 - 10:33 am.

    Walmart? Really?

    Read this quote again with emphasis added:

    “There is little dispute that Walmart’s price reductions have benefited the 120 million American workers employed OUTSIDE OF THE RETAIL SECTOR.”

    In other words, you can benefit from Walmart’s low prices — but only as long as you don’t work for them, or one of their suppliers, or one of their vendors, or anyone in any way associated with the company — or any other retail endeavor! Wow. I can’t believe that I missed all of that great benefit to our economy that we can get just by avoiding all possible contact with Walmart or the entire retail sector (other than at the cash register, of course).

    Citing Walmart as an example of healthy redistribution of wealth is a little like hailing cancer for redistributing white blood cells.

    Further, when you have billionaires like Warren Buffet, and even alleged billionaires like Donald Trump, asking to raise their taxes (which both of them actually did), then it’s long past time to reconsider the distribution of wealth.

    But let’s be clear about what that means. It is NOT about taking their money and giving it to poor people. And it is NOT about limiting how wealthy they can become or what they can do with their wealth. It’s about recognizing in our tax code that those who have benefited the most from our economic playing field have the greatest amount of responsibility (and motivation) to protect it. In other words, it is in their own BEST INTEREST to make sure the system captures the appropriate portion of their wealth for the benefit of all. Without that, the system will ultimately collapse.

  8. Submitted by Brian Simon on 01/27/2017 - 10:46 am.

    Utter Claptrap

    The world would not be worse off without Gates, or Zuckerberg. Neither introduced a revolutionary product. They both just happened to win in the marketplace. On the Waltons, the author only examines half their impact. Better access to cheap goods for condumers? Sure, that’s true. But he ignores the small businesspeople who’ve closed their stores, unable to compete with the behemoth. Rural shoppers have fewer shopping options, Walmart has squeezed out the competition. Are we better off? I’m skeptical.

    More to the point; were any of these people even motivated by the accumulation of massive amounts of wealth? What is the benefit to society that so few can accumulate so much? Wouldn’t it be better if more people could accumulate more modest wealth?

  9. Submitted by Joel Stegner on 01/27/2017 - 01:14 pm.

    Please, cut the propaganda

    Those with wealth are not victims. They do not deserve anyone’s sympathy. What we have are a situation in which many of the children of the wealthy lack any discernable personal values or any sense that they need to follow the rules that apply to everyone else. The flip side of generational poverty is generational wealth and privilege.

    Tip to the wealth. Earn your wealth honestly, treat your workers humanly, spend your time and effort to improve your community, serve your customers well and don’t waste our time talking about how wonderful you are. If you are, others will say so without having to be paid to do so.

    In Minnesota, the Dayton family is an example of this. Their success came out of a life of service to others. Now we witness a Governor Dayton who is working his butt off, through great pain and a serious illness, to make life better for the state of Minnesota. He has spent most of his inheritance to do good for others, showing his humanity at all times.

    The contrast with Trump is breathtaking. Humble beats haughty ever day of the week.

  10. Submitted by Connie Sullivan on 01/27/2017 - 04:03 pm.

    This week’s New Yorker magazines has an article about the many ultra-wealthy Americans (hedge fund managers, private equity funds partners, Silicon Valley centi-millionaires) are seeking out private refuges for the coming chaos–when those far below them on the economic scale and in dire straits because of the global warming these rich guys know is at critical stage, finally rebel. The basic cause of rebellion will be these guys’ obscene wealth, and the huge wealth gap between them and the rest of us. The rich are buying up remote land and survivalist supplies and airplanes, to save their live and their families’ lives. Those not rich enough to prepare? We’ll die.

    Thomas Picketty and his colleagues have been researching and publishing mightily on the obscenity of huge wealth in today’s world. They recommend an annual tax on everyone’s accumulated wealth, not just on annual income. They also suggest that every American be guaranteed a minimal annual income on which to live. (They don’t talk about global warming and the tragedy that will bring to the U.S.)

    I underscore the correctness of the post above, that referred to the structural bias in our tax system, which since WWII has been skewed toward letting the rich get away without paying tax.

    One of the hypocrisies of Donald Trump’s pre-election stances is that he promised to get rid of the “carried interest” tax break for hedge fund managers–they never pay more than 15% on any of the tens of millions they earn each year, because they insist that the fees they earn (20% of the value of the hedge fund, plus 20% of all its earnings, if any) are not salary or wages. So they pay fewer taxes than the middle-class guy pays on his salary. Trump has since taken that promise down from all web sites and he never refers to it, since he’s appointed several billionaires and hedge fund and private equity guys, and several Goldman Sachs executives, to his Cabinet. Swampy up there.

    Picketty et alia have also shown that the whole idea of upward mobility in the United States has become pure and empty myth. You can’t move up from the bottom any more. They have figures to show that.

  11. Submitted by Joe Musich on 01/27/2017 - 09:38 pm.

    So how do I wrap my …

    head around the fact this appeared in print ? An opinion piece disguised as factual news reporting from another house of alternaive facts – The Center for the American Experiment. The local press has just given too much airplay to this nonsense and now is wondering about the results! Ha ! It is called shooting yourself in the foot. Next time drap a water mark over the entire article rather then a miniature disclaimer in italics prior to the piece please !

  12. Submitted by Ilya Gutman on 01/28/2017 - 01:02 pm.

    Wrong indeed

    Let me start with saying that Oxfam is wrong on many other things in addition to the one mentioned in this article… because when helping poor morphs into political organization, no one wins.

    Now, if one reads all the comments here, the common thread is pure envy: why are they so rich and we are not? Of course, if one takes all the wealth of those 8 people and spreads it around half the world, everyone will get about $100 which will not make anyone richer but no one thinks about that. It’s been tried and didn’t end well (in the USSR and many other Socialist countries, including Venezuela, for example). Those $100 will not help a poor guy to become a millionaire or even get into the middle class. What is “obscene” about their wealth? Why is anyone even counting how much those people have? Why do we care how they got so long as it is legal? It’s all about our “rich and famous” adoration culture – what they have, what they wear, what they do, what they think… Our snooping on them is much more obscene than what they have.

    And for those who are saying that we are not richer, look at all the technology even the poorest have such as cell phone and I-Pads. There is so much more to have now… As for tax code, yeah, let’s make it a flat tax with no deductions and get the rest with the sales tax… how does that sound? But that is actually similar to what Denmark does…

    • Submitted by Peter Stark on 01/30/2017 - 09:25 am.

      Strawman

      No, these comments have nothing to do with envy, and nobody is suggesting we need to move towards a command economy. That’s as bad a reply as me suggesting you are only defending this claptrap editorial because you wish you were rich. Neither did anyone upthread suggest just taking money from 8 people and spreading it around half the world. I’m not really sure where you’re getting that policy suggestion from! Piketty’s tax on Capital is a scheme to tax wealth at the percentage difference between the growth of the return to Capital and the growth of economic output, not a flat 100% tax on all rich people.

      Why not try engaging with the arguments presented, like mine, that social mobility is hindered by the unequal distribution of wealth. Why are only the already rich allowed to be the innovators in our society? Not all of us have access to wealthy parents like Ms. Hilton or President Trump, or wealthy in-laws like Mr. Zeller’s hero, Sam Walton. Those folks started their careers on third base, and Mr. Zeller is acting like they hit a triple. Why is it okay for a kid born into the bottom quintile of family income to have less than a 5% chance of making it into the top quintile, while a kid born into the top quintile has a 40% chance of remaining there?

      • Submitted by Ilya Gutman on 01/30/2017 - 08:22 pm.

        Let’s engage…

        The word “obscene” in Oxfam report and in many comments here assumes something very bad that has to be dealt with meaning to stop this practice. And the only way to reduce the difference between two amounts is to take from one and add to another (provided, of course, that no outside amount is involved but no one gave any idea that it would be). So no matter what, this is all about taking more from the rich and somehow giving it to the poor. The question is only how much to take.
        But this is a totally wrong approach. The right one would be to find out how to help poor people help themselves and then find out how much money is needed and maybe we already have enough. This approach would be driven by reason while starting with saying “some people have too much money” is driven by envy.

        So let’s engage with the arguments presented. Why is social mobility hindered by unequal wealth distribution? Is a chance of a kid born in bottom quintile to make it to the top quintile that low because Gates is so rich? Why does it matter for that kid? Maybe it is possible to say that it is necessary to have $1,000 ($100, $10,000, insert your number here) for a kid to be able to have 20% (10%, 25%, insert your percentage here) chance to move up but that would be my approach… On the other hand, money is just one of the factors that help people succeed with others being supportive family, school with good discipline, encouragement from respected figures who don’t provide excuses, etc., right?

        • Submitted by Peter Stark on 01/31/2017 - 09:48 am.

          The Correct Approach

          “But this is a totally wrong approach. The right one would be to find out how to help poor people help themselves and then find out how much money is needed and maybe we already have enough. This approach would be driven by reason while starting with saying “some people have too much money” is driven by envy.”

          This has been done already, and we already know we don’t have enough spending on economic/social justice policies. College tuition is essentially unaffordable because of declining public spending; healthcare and insurance costs are astronomical compared to countries with public-based insurance/care systems; our infrastructure is in deep disrepair; welfare and safety net spending is atrociously low and insufficient. So, no, it isn’t about envy, it is about the rich being able to shirk their responsibilities to society while sticking the rest of us with the bill. This isn’t about emotions, it’s about reason.

          The debate now is what to do about it; those on the Right think that we need to deregulate and reduce taxes in order to (paradoxically) increase tax revenue and economic growth. The Left believes that we need to raise taxes for the majority of people, but especially the rich, and use the money to fund the programs mentioned above, and more.

          “Why is social mobility hindered by unequal wealth distribution? Is a chance of a kid born in bottom quintile to make it to the top quintile that low because Gates is so rich? Why does it matter for that kid? Maybe it is possible to say that it is necessary to have $1,000 ($100, $10,000, insert your number here) for a kid to be able to have 20% (10%, 25%, insert your percentage here) chance to move up but that would be my approach… On the other hand, money is just one of the factors that help people succeed with others being supportive family, school with good discipline, encouragement from respected figures who don’t provide excuses, etc., right?”

          It matters for several reasons. I’ll highlight a couple: First, if a kid from the lower quintile wants to start his own business, he likely can’t, because he’s got no credit, no access to family wealth, and nothing to start with. Meanwhile, my kid can just borrow some money from the Bank of Dad, or they can head off to the bank with me and cosign on a loan. They can have access to my network of professionals to guide them about proper business and financial planning, and depending on what they want to do (say, Accounting practice) they have a rolodex of potential clients all wrapped up and ready to go. Let’s say that my kid and the lower quintile kid are competitors. Who has the upper hand? Because they were born well-off, my kid can outcompete kids who were not born well-off. They will be able to go to college on my dime, fund a startup on my dime, and benefit from my network.Those are massive competitive advantages.

          The main reason distribution matters is that concentrated wealth has the tendency to concentrate further, and to slowly turn democracy against the mass majority of people. Wealthy people, through disproportionate representation (lobbying, direct funding of campaigns, etc), vote themselves big tax breaks (including inheritance), gut voting rights, cripple or kill unions, cut welfare and safety net spending (goodbye, Social Security!), decimate public education spending, and a whole host of other terrible policies which are designed to entrench their status against interlopers.

          Being born into a lower class means you likely do not have access to the things you need to climb out. Otherwise, more people would! There is no such thing as a natural serf; many countries have much better social mobility than the USA, and those countries also have much less inequality.

          Source: https://www.brookings.edu/wp-content/uploads/2016/07/02_economic_mobility_sawhill_ch3.pdf

          Furthermore, Rich people like Mr. Gates skew public funding for things like medical research towards potentially inefficient ends.

          Source: https://www.nytimes.com/2014/03/16/science/billionaires-with-big-ideas-are-privatizing-american-science.html?_r=0

          So, instead of focusing our research spending on, say, reducing lead levels in drinking water, which matters mostly to the poor, we instead spend it on curing cancer, which is a primary concern of the wealthy. Similarly, instead of spending money on public education that all can benefit from, they want to spend it on exclusive charter and private educations that meet the needs of the privileged.

          • Submitted by Ilya Gutman on 01/31/2017 - 07:54 pm.

            Nice discussion

            How do we know that we do not have enough spending economic/social justice policies? The fact is that the level of poverty has stayed the same since the late 60’s despite more and more money being poured into fighting poverty. What does it tell us? That we have enough money in that already and the problem is not the lack of money.

            College tuition is perfectly affordable (public colleges charge $6-8 thousand a year and government grants provide help to those who can’t afford it. No doubt that anyone may afford it (and I know plenty of people who did that with zero help and no money to begin with). Healthcare is now subsidizes in ACA and welfare and safety net spending is more than enough for people who want to move forward (OK, I was one of them). So who is avoiding responsibilities here? People who get help from government should be responsible for using that help wisely and moving on to let others use it when necessary.

            I hope you will agree with me that if everyone is taxed 100%, no one will be willing to do anything. Since zero tax is not an option, it is obvious that there is an optimum level of taxes that brings the best result. It may depend on people, time, place, etc., but that level exists which means that if the level of taxation is higher than that optimum level, reducing taxes is the right thing to do… so it is not a paradox. On the other basis, raising taxes may be counterproductive for the society, including the poor. Now, taxing majority to help others, does it include any strings and responsibilities for those who are being helped?

            If a kid from the lower quintile wants to start a (successful) business, he or she should first get some knowledge and skills which is dependent upon that person’s abilities and work habits (and family support, of course) and those things have nothing to do with wealth. Now, if that person, after graduating successfully from school and college, wants to take a loan, I am sure it will be approved. But how much money does one need? Maybe $20 for a lemonade stand? So how many wealth are you going to give everyone? And sure, networking is extremely important but you can’t buy it for money so again, Gates’ money will not help. But you totally ignored my point that you instilled good character into your kids which is way more important than your money and connections. And yes, there are rich people who don’t deserve it but you can’t make the world completely fair.

            “The main reason distribution matters is that concentrated wealth has the tendency to concentrate further, and to slowly turn democracy against the mass majority of people.” Can you please prove this? I would say that in the last hundred years everyone got to live much better even though the wealthy might have concentrated more wealth… Again, so what?

            And finally, about research. If not for rich people, most modern medical miracles didn’t exist. Mayo clinic would not either. Do you really think that poor people would like not to have all life saving drugs and machines if they are guarantee healthy level of lead in their water? And how do public schools work in inner cities? Maybe charter ones may help in some cases?

          • Submitted by Peter Stark on 01/31/2017 - 08:59 pm.

            Furthermore…

            There is also a fair amount of research that shows high levels of inequality harm social mobility. A couple of good links:

            1. https://www.brookings.edu/blog/social-mobility-memos/2015/05/19/the-great-utility-of-the-great-gatsby-curve/

            2. https://www.brookings.edu/blog/social-mobility-memos/2015/05/29/economic-despair-the-vicious-circle-of-inequality-and-social-mobility/

            Low social mobility and high income inequality appear to be highly correlated. So, rather than motivating kids to work harder and reach the heights of success, high inequality tends to entrench the positions of kids born to well-to-do families. Higher class families can provide better educations, better job networks, and better resources for starting businesses. In fact, high inequality may have a “despair” effect on low income kids. The second link shows how kids in similar situations vis a vis their parents educational levels are more likely to drop out of high school if they live in states with higher levels of inequality. These findings hold up even after controlling (via econometric analysis) for factors like demographics, labor market conditions, school funding levels, and other factors.

            So, yes, high inequality is very damaging to social mobility.

  13. Submitted by Dennis Wagner on 01/29/2017 - 10:09 am.

    Werewolf hunters?

    Must be some werewolf hunters out here with these silver bullet solutions and answers. Just that simple.
    Example: Legal: If you are able to twist the tax code to your personal advantage and many opther folks disadvantage, that is legal, is it fair? Is it moral? Doesn’t make any difference as long as it is legal.

    Example: Sales Tax: Less well to do folks spend all their income, the more well to do, do not, thus a $30K income spent 100% at a 5% sales tax gets taxed on every dollar. A $300K income that spends $100k, only gets taxed on 1/3 of their income. Seems the silver bullet missed their mark a little bit. by ~ $10,000. If someone wants to argue how much was paid, that is fair, then we should also argue, that rich man and poor man alike should do military time on the battle field, for the ultimate payment!

    But then again these discussions aren’t about, whats right, whats moral, whats fair, whats rational, whats good for the majority, with respect for the minority, they are about pure envy, especially those of us in the top quintile, (a great comment) that know it and appreciate our success, evidently, we are envious of those higher up, even through we don’t know who they are or what they have that we don’t! $100 won’t help a guy become a millionaire? Interesting? Seems lots of immigrants have landed in the US basically penniless, guess they are condemned for life to poverty. Not so sure how folks like me made it, Started with $14.72 in my bank account back in 1960.. Not to mention of course guys like George Soros, seems he cam e out of Hungary as a refugee (without the $100).

    • Submitted by Ilya Gutman on 01/29/2017 - 11:50 am.

      Let’s see…

      So what is “twisting” a tax code? If I have to go from Minnesota to Indiana, I can take I-90 and pay all the tolls in Illinois and be stuck in downtown Chicago or I can go south and take I-80 and mostly avoid those things. Is it “twisting” geography or a smart thing to do?

      Sales tax: this is what all great “Democratic Socialist” countries of Europe are doing – VAT is universal there, I believe. If we want to follow their example, we should learn what they do first. And to the best of my knowledge, selective service system is not selective and registers every man, regardless of income (but of course, it is gender selective, despite all calls for equality).
      Lenin was not dirt poor when he started his business of revolution and neither were hundreds, if not thousands, of wealthy people who gave him money for that to achieve “justice and equality.” However, they personally didn’t take the Winter Palace – it was many others who wanted to take revenge for being poor.

      And of course, you exactly right about people who landed here penniless… and worked their way up. Some got $100 and benefited from that and some didn’t and still succeeded. The point is that $100 for everyone will not solve any problems… except making some people feel good that there is no “obscene” wealth anymore.

      • Submitted by Dennis Wagner on 01/31/2017 - 02:35 pm.

        No idea:

        What taking a toll way has to do with the income tax code, or the topic of the article: Could the response be a little more definitive?
        The previous post brought up the positives of sales tax and now condemn it? And somehow Lenin has something to do with our present twisted tax system?
        Again, the comment was the $100 won’t help any one, and now saying it would? Not sure where anyone advocated $100 for everyone, but an assertion that $100 at the right point in time will not help any one, that is ludicrous. It was noted in an earlier post with a link, that 17 agencies (mostly socially oriented to help disadvantaged areas of the economy) are on the Trump chopping block. Cost per American ~ $22.36, the cost to support interest deductions on the millionaire and billionaire mansions is ~ $296.29 per American. As also noted earlier, would be very interested in folks moral compass on how this is justified, and biblically speaking (although agnostic), “it is easier for a camel to go through the eye of a needle than for a rich man to enter the kingdom of God.” won’t one want to be just a bit more humble and focused on the welfare of there fellow man? Just would like to understand clearly, the points of the discussion not sure if you are in agreement or disagreement, and how folks deal with the compass.

        • Submitted by Ilya Gutman on 01/31/2017 - 07:54 pm.

          Explanation

          You said: “If you are able to twist the tax code to your personal advantage and many opther folks disadvantage, that is legal, is it fair? Is it moral? Doesn’t make any difference as long as it is legal,” so I compared taking a toll free faster route to taking tax deductions – similar idea: if one can save time and money and it is legal, why not do it? Remember, the State of Illinois would lose money on my toll and gas which I will spend less of…

          You said that sales tax is not fair to the poor and I pointed out that this is how European countries operate. As for Lenin, I wanted to emphasize that even though many people were not envious of the very wealthy in Russia, they helped unleash the fury of those who were.

          Of course, it is better for anyone to have $100 than not to have them – no one argues this point, – but we already have enough of those to help right people at the right time so we don’t need to demand that wealthy pay more and more and should not be that wealthy to begin with. As for moral compass, the wealthy give to charities and pay in taxes well more than others (on average, of course). But it should be their own choice because you cannot force morals on others.

  14. Submitted by Paul Udstrand on 01/31/2017 - 10:53 am.

    Fun with numbers, trickle down

    The idea that we have a zero sum economy wherein we have to choose between poverty wages and affordable consumer goods is simply daft. The obscenity is that while Waltons divide $100 billion among themselves their employees collect taxpayers subsidized food stamps. This pretends that only “value” Walmart can or should contribute to the economy is cheap stuff. That’s a nice assumption for a billionaire but not so much for everyone else.

    • Submitted by Ilya Gutman on 01/31/2017 - 07:55 pm.

      Maybe

      If the Waltons pay more to their employees who do not produce for more (remember Marx’ theory of labor?), those employees may not need food stamps but they will not be able to afford what is sold in Wal-Mart because the prices will go up..

      • Submitted by Peter Stark on 02/01/2017 - 09:09 am.

        Incorrect

        We’ve actually studied this too:

        http://laborcenter.berkeley.edu/pdf/2011/bigbox_livingwage_policies11.pdf

        If Walmart raised all of their wages to a minimum $12 an hour, the increase on prices would be 1.1%, which is far below Walmart’s estimated savings to customers. This works out to $0.46 per average shopping trip, or $12.49 per year for the average consumer, who spends roughly $1,187 a year at WalMart. Low-income workers at WalMart would see their yearly wages increase by $1,670 to $6,500, which may be enough in many cases to get people off the dole and off of your tax dollars.

        Basically, the point is that not all price relationships to wages are the same. WalMart’s savings largely come from logistics, the bargaining power that comes from Monopsony, and other economy of scale factors.

        • Submitted by Ilya Gutman on 02/02/2017 - 07:49 am.

          If only everything were that easy… The prices will rise in Wal-Mart so more people will buy in Target instead so there will be fewer people buying in Wal-Mart so the prices will actually have to go up more, etc. On the other hand, why $12 per hour if it has negligible effect, why not $20. Or does this consider that if everyone in Wal-Mart will earn $12 per hour, those who earn $12 per hour now would want a raise, and rightfully so.. and the prices will have to go up more… And finally, those people may lose their food stamps so at the end they will not gain anything. Will you support taking $100 in food stamps away from families if they earn $150 more? And all this at the expense of breaking the main economic law of supply and demand…

          • Submitted by Peter Stark on 02/02/2017 - 03:36 pm.

            No?

            “The prices will rise in Wal-Mart so more people will buy in Target instead so there will be fewer people buying in Wal-Mart so the prices will actually have to go up more, etc”

            That doesn’t make sense. If prices go up at Walmart enough that customers shift to Target, then Walmart has to lower its prices to be competitive. If it was committed to higher wages, it would have to find other cost saving mechanisms to compete. But there is no reason why increased competition would lead to increased prices. Competition leads to lower prices.

            This is also conjecture. You have to demonstrate that WalMart’s prices would go up enough to make Target more competitive. This is called an “empirical claim.” I don’t mean to be a critic, but you almost never provide sources for your claims, and that leaves them as assertions and conjecture, as opposed to arguments or factual statements.

            For example, we know how much more expensive Target is than Walmart. https://www.fool.com/investing/general/2014/07/20/everyday-low-prices-vs-expect-more-pay-less.aspx

            So, Walmart is 3.8% cheaper across a basket of goods than Target. So, assuming Walmart raised wages to the $12 minimum, and prices at Walmart went up the estimated 1.1%, WalMart still has a price advantage of 2.7%.

            “On the other hand, why $12 per hour if it has negligible effect, why not $20.”

            The study by UC Berkeley was commissioned because the City of Berkeley told a Walmart that wanted to open there they’d have to pay workers a minimum of $12 an hour, or not build the store. UC Berkeley released another study (that I’m having trouble finding anything but references to) that showed a $15 min wage at WalMart stores also had a negligible effect on prices.

            “Or does this consider that if everyone in Wal-Mart will earn $12 per hour, those who earn $12 per hour now would want a raise, and rightfully so..”

            The cycle of inflation is really unlikely to continue out of control like this. Using the UC Berkeley study above, 72% of WalMart employees would see their wage raised to $12. Only 28% have a wage above that level, and if raising wages for 72% of employees leads to 1.1% increase in prices, then raising wages for 28% of employees is not likely to raise prices much more.

            “And finally, those people may lose their food stamps so at the end they will not gain anything. Will you support taking $100 in food stamps away from families if they earn $150 more?”

            The positive here is that my taxes are no longer: 1. Subsidizing WalMart’s low wages, 2. Wasting money on gov’t bureaucracy processing food stamps. So, yes, I much prefer people making more money and not taking welfare money.

            “And all this at the expense of breaking the main economic law of supply and demand…”

            The laws of economics are very clearly not being violated. I’m not sure you have a strong grasp of price theory if you think competition between stores increases prices.

            • Submitted by Ilya Gutman on 02/03/2017 - 06:05 pm.

              I apologize

              Mr. Stark, I apologize but I tried to respond to your posts, including another one that you posted earlier, several times but none of my messages was allowed to go through. I wish we could continue this interesting and polite discussion.

  15. Submitted by Paul Udstrand on 02/03/2017 - 09:47 am.

    The definition of “failing”

    We tend use strange metrics when we evaluate whether or not economies are healthy or failing. For instance the primary measure that economists tend to use is GDP growth or lack thereof which only captures a particular snapshot from a particular perspective.

    A more comprehensive analysis of an economy can include less abstract measures, such as whether or not everyone has affordable access to quality health care, whether or not people can retire comfortably, whether or not people can afford to vacation and spend time with their families, or weather or not people working full time, either at one job or more than one job are earning living wages. We don’t have to choose between poverty wages and affordable stuff, a successful economy provides living wages AND affordable stuff. Any economy that fails to create living wage jobs is a failing economy.

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